# EC Ltd, Kaplan Kit

This topic contains 5 replies, has 2 voices, and was last updated by  John Moffat 2 years, 10 months ago.

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• acca13
Participant

EC Ltd produces and sells the following two products throughout the year in a constant mix:

Product X Product Y
Variable cost per \$ sales \$0.45 \$0.6
Fixed costs \$1212,000 per period

The management of EC Ltd has stated that total revenues will reach a maximum of \$4,000,000, and is generated by the two products in the following proportions:

Product X Product Y
Variable cost per \$ of sales 70% 30%

Required: calculate breakeven sales revenue based on the sales mix assumed above.

I just need to know, is my way of solving the question right?

acca13
Participant

Kits Solution is:

Breakeven revenue = 1212000/ 50.5%

Breakeven revenue = 2,400,000

Working:

Average contribution to sales ratio ( on a \$100 total sale basis)

X Y Total
Sales \$70 \$30 \$100
Contribution \$70*0.55 \$30*0.4 \$50.5

Average contribution to sales ratio: \$50.5/\$100 = 0.505

acca13
Participant

Product X:

``` Sales: 2800000 (4000000*70%) VC : 1260000 (2800000*\$0.45) = 1540000 ```

`Product Y: `

Sales: 1200000 (4000000*30%)
VC : 720000 (1200000*0.6)
= 480,000

Weighted average C/S ratio; 1540000+480000/4000000 =0.505

Breakeven revenue = 1212000/0.505 = \$2400000

John Moffat
Keymaster

Your way of doing it is fine

acca13
Participant

Thank you so much..

God bless.

John Moffat
Keymaster

You are welcome

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